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Bears Pulling Rug Out From Under This Rally?

Thursday, 23 Sep 2010 | 5:50 PM ET

By Thursday close, chatter turned from 'had stocks found a floor' to 'how far will they fall' after the S&P 500 closed below 1130, an important technical level.

Analysts keyed into 1130 because it was a point of resistance in June and again in August - in other words, the high end of the S&Ps range all summer.

Bulls were hoping that level would hold - as a sign that past resistance had become support.

But it didn't hold.

And that validates the argument made by bearish investors who say there are too many uncertainties facing the market for the rally to be sustainable.

"Market technicians had been very positive on our breaking out of that range, so falling back under it added to the decline we saw and accelerated our losses," explains John Stoltzfus, senior market strategist at Ticonderoga Securities in a Reuters interview.

What should you make of it?

Instant Insights with the Fast Money traders

The market is sleep walking, says Oppenheimer's Carter Worth. The S&P is in no-man’s land. And that's evidenced by all the contradictions in this market. The banks are performing poorly but the insurance companies are holding up quite well. I think we’re in a moment of equilibrium. The bulls and bears are matched up evenly.

Chartology
Sharing some dividend plays, with Carter Worth, Oppenheimer Asset Management.

I don’t think investors realize what critical levels we’re at on the S&P, says Guy Adami on the Halftime Report. Personally, I was surprised by the bounce earlier in the session. We’re at a crossroads. We’re either going to explode higher or trade a lot lower. I’m bias to the downside.

Don't forget we kissed 1150 a few days back and then we started to retrace the move, adds Steve Grasso. If we retrace the whole move it’s very negative. If the S&P crosses below 1116, the 200-day, bail out, he says.

For what my opinion is worth, my bias is higher, Grasso adds. Looking at fundamentals, the potential for a GOP win in the House should be good for stocks.


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Trader disclosure: On Sept. 23rd, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL), (GOOG); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Terranova Owns (APA), (AAPL), (ARUN), (BMO), (C), (GS), (IBM), (HES), (JOYG), (XBI), (NBR), (NOV), (OXY), (ORCL), (PEP), (POT), (RSH), (SLB), (SU), (SPLS), (RIG), (UPL), (MA), (VRTS); Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST); Boockvar owns (PEP), (NKE)

For Anthony Scaramucci
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Stuart Frankel & Co and it’s partners own (PFE)
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Stuart Frankel & Co and it’s partners own (RDC)
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Stuart Frankel & Co and it’s partners are short (QQQQ)

For Gene Munster
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Piper Jaffray makes a market in (AAPL), (ACOM), (AMZN), (BIDU), (DRIV), (EBAY), (FMCN), (GOOG), (GSIC), (IACI), (KONG), (LOGM), (MCHX), (MELI), (PRTS), (RLOC), (SINA), (SOHU), (VCLK), (WWWW), (YHOO)

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